Asia stocks supported by global growth optimism, dollar strong

A
woman walks past an electronic board showing the graphs of the
recent movements of Japan's Nikkei average in
TokyoThomson
Reuters

By Shinichi Saoshiro

TOKYO (Reuters) - Asian stocks edged higher on Tuesday as
investors took heart from further evidence of strength in the
global economy, while the dollar hovered near a one-week high
against its peers thanks to higher U.S. yields and a floundering
euro.

Equity markets have enjoyed strong support this year thanks to
rising corporate earnings on the back of an improving global
economy.

That confidence was again on display overnight, with upbeat data
in Germany helping the benchmark DAX <.gdaxi> brush off
worries over the collapse of German coalition government
talks.</.gdaxi>

German data showed strong industrial activity, while the
Conference Board's leading economic index for the United States
rose 1.2 percent in October, double the rate economists polled by
Reuters had expected.

Wall Street was led up by telecom and tech shares, with the Dow
<.dji> edging back towards record highs scaled two weeks
ago. [.N]</.dji>

In currencies, the dollar index against a basket of six major
currencies stood near a one-week peak of 94.104 <.dxy>
touched overnight.</.dxy>

The greenback was boosted by rising bond yields, with the
two-year U.S. Treasury yield touching a nine-year high of 1.755
percent overnight.

The yield has risen as investors priced in more interest rate
hikes by the Federal Reserve, while the Treasury is expected to
increase debt issuance with a focus on short- and
intermediate-dated maturities.

"The two-year yield appears to have risen too high now, as the
Fed is only likely to hike rates twice at most next year
considering current trends in U.S. wages and prices," said Makoto
Noji, senior strategist at SMBC Nikko Securities.

The dollar was also boosted as the euro has been weakened by
political risks arising from German Chancellor Angela Merkel's
failure to form a three-way coalition government, thrusting
Europe's biggest economy into a political crisis.

Merkel, whose conservatives were weakened after they won an
election in September with a reduced number of seats, said she
would inform the German president that she could not form a
coalition, after the pro-business Free Democrats withdrew from
negotiations.

The euro stood little changed at $1.1736 and in close reach of a
six-day low of $1.1722 touched on Monday.

The dollar was steady at 112.565 yen , having bounced from a
one-month low of 111.890 set overnight.

The Australian and New Zealand dollars were little changed at
$0.7551 and $0.6809 , respectively.

U.S. crude futures was 0.15 percent lower at $56.34, extending
losses from overnight when wariness towards next week's OPEC
meeting and a bounce by the dollar hurt broader commodities.
[O/R]